On July 1, the Arizona Captive Insurance Act went into effect, and the Arizona Department of Insurance Captive Division began accepting applications to establish captive insurers in the state. The division formed was a result of a captive law passed by the state legislature in 2001.
An Arizona captive must maintain a principal place of business and hold at least one board of directors meeting in Arizona each year. The insurer must also engage a “captive manager” that resides in Arizona, and must establish any necessary business relationships with accountants, banks, attorneys, and other professionals doing business at a location in Arizona.
Two private associations have already been formed to promote the development of captive insurance in Arizona—the Arizona Captive Insurance Association and the Arizona Captive Insurance Council.
The division will be headed by Richard Marshall, who joined the Department as its Captive Insurance Administrator. “Mr. Marshall is a seasoned professional, who understands the benefits of captive insurance to commercial enterprises and appreciates the importance of sound, quality programs,” said Director of Insurance Charles Cohen. “His will be a sure hand on the tiller as we develop this exciting new Arizona industry.”
According to Marshall, among the advantages of forming a captive in Arizona is a “pro-business regulatory environment, no premium taxes and reasonable minimum capitalization requirements.
“We recognize the way the market is going now, that people are looking for alternative risks. From a lot of the agents, there has been a lot of interest in self-insurance. What you’ve had is a diminishing number of fronting companies, so a lot of these captives, unless they can find a fronting company, are going to be writing business on a direct basis which can limit their options.”
According to Marshall, one thing the division has not done is set goals for the first year.
“We want to have quality captives and avoid having any go under on our watch,” Marshall commented. “We’ve received quite a few inquiries and we should be receiving applications over the coming weeks. Arizona thinks enough of this for the long-term to set up a separate division.”
As for general trends in the captive industry, Marshall expects to see more of them forming in the coming year. “I think businesses for whatever reason that would not of thought of it before, are being forced to look at alternatives.”
To financially set up the division, “the department was budgeted for and you already have a number of the resources within the department. The department has relationships with outside actuaries you can use, so we can work within the system rather easily,” Marshall added. “There’s enough business out there for all the domiciles. I don’t feel I have to climb all over everyone else’s backyard to find the business.”
Topics Arizona
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